Top 10 Biglaw Firm Is Cutting Attorney Salaries As Part Of COVID-19 Austerity
Even firms with $2 billion+ in revenue need to cut salaries, at least for now.
(Image via Getty)
We’ve long suspected that even the Biglaw firms with the most impressive financial performance weren’t going to be immune from the economic ravages of COVID-19. Now we’ve learned the Hogan Lovells — a firm that took in $2,246,050,000 in gross revenue last year, making an impressive 8th on the latest Am Law 100 ranking — has instituted salary cuts for attorneys.
The firm had previously announced they were delaying bonuses and 2019 profit distributions for all partners (income and equity). They also deferred UK and Asia Pacific salary reviews and discretionary bonuses for lawyers and for the majority of business services teams worldwide, which were scheduled for May 1st. Now the firm announced in an email (full version available on the next page) that, “April was better than we expected but it was still down both in relation to budget and last year. As far as the outlook for May, we expect further softening as some of the COVID-19 specific project wrap up and overall economic activity continues to be affected. Although the constraints affecting litigation will begin to loosen, we predict that it will be some months before we are back to pre-crisis levels.”
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And if you guessed all that all that means the firm will institute salary cuts, well, you get a prize. The new salary cut scheme is as follows:
The series of measures which the firm is additionally enacting as of 1 June are as follows:
U.S. equity partners will reduce their monthly draws by between 15% and 25%. In addition, all equity partners will defer half of any profits for the first quarter of the year normally paid in August until November.
Non-equity partners will be taking a reduction from 1 June of 15% in their base compensation, equivalent to a cut of about 8.75% to their annual compensation.
Base compensation of Counsel, Associates, Attorneys, Specialists and Knowledge Lawyers in the U.S. is also being adjusted. For certain highly compensated Counsel and Specialists, the reduction will be 15% – an effective reduction of 8.75% for the year. For everyone else in these categories, the reduction will be 10% from 1 June onward – effectively 6% for the year. In addition, the firm will be reducing the compensation of Senior Counsel by 15%. There will be no reductions for those (including Senior Counsel) whose base compensation is $100,000 or lower.
Decisions on U.S. attorney bonuses will be made in the normal course at the end of the year.
HoLove CEO Stephen Immelt had this to say about the firm’s austerity measures and overall financial outlook:
“The firm’s overall position is very solid. We continue to see an uptick of work in the technology and life sciences sectors, our restructuring practice is very active, and we have successfully advised on headline-grabbing M&A deals. However, we are facing an uncertain environment and economic activity globally continues to drag. Complacency is not an option for us. We are therefore continuing with our policy of cutting back all non-essential costs and making measured adjustments to compensation. Our approach is to share the burden to protect both the business and our people so that we are well-positioned to meet our clients’ needs when the economy bounces back. We can always revisit and unwind some of these measures if the economy rebounds faster than expected, but otherwise, we plan to revisit these measures by the end of the year.”
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If your firm or organization is slashing salaries, closing its doors, or reducing the ranks of its lawyers or staff, whether through open layoffs, stealth layoffs, or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive. You can email us or text us (646-820-8477).
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Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).
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